Margaret Thatcher oversaw a revolution in the way people invested in the stock
market and property

One of Margaret Thatcher's lasting legacies was to turn Britain into a nation of private shareholders.

Justin Urquhart Stewart of Seven Investment Management said: "This was an era of popular share ownership. People might have only owned shares in a couple of companies but this was the first time they held shares and made money from them."

Before the 1980s a small elite – of around 3 million people – owned shares privately. But the number boomed with the privatisation of state-owned utilities such as British Telecom and British Gas.

Mr Urquhart Stewart said that by the end of the 1980s there were almost 12m private shareholders in the UK, a number that would rise still higher with the demutualisation of the building societies, which started in 1989 when Abbey National floated on the stock market. Many others followed in the late 1990s.

Adrian Lowcock of Hargreaves Lansdown added: "In the 1970s just 7pc of people in Britain owned shares directly. By the end of the 1980s a quarter did."

These privatisations were hugely popular. When British Telecom was sold in 1984 two-fifths of the shares sold went to the general public, most of whom were novice investors. Around 2.1 million people invested in the company; they saw the value of their holdings double on the first day, such was the demand for the shares.

The British Gas privatisation in 1986 proved to be just as popular, backed by a TV advertising campaign urging viewers to "Tell Sid" about the offer.

According to Brian Dennehy of Fundexpert.co.uk, 4 million people applied for the shares, of whom 1.5 million received an allocation. Many sold their shareholdings within the first few days for a handsome profit.

Those that held these shares for the longer term have also seen good returns in many cases. According to the Brewin Dophin, British Gas has proved to be the most profitable of these privatisations. An investment of £100 would have been worth £1,246, by the end of 2011 – an increase of 1146pc. This is just the capital gain and does not include the value of any dividends paid. This is a far bigger gain than the growth in the stock market over this period.

These were two of the most high-profile privatisations. But during this period ordinary investors were able to buy shares in Cable & Wireless, British Aerospace, Britoil, Jaguar, British Steel, Rolls-Royce and British Airways – to name but a few.

The chart below shows how some of the popular privatisations have performed relative to the stock market.

A spokesman for Brewin Dolphin said: "In the 1980s, the Thatcher Government successfully developed the policy of selling nationalised industries into private ownership, or privatisation as it became known. However, back then the notion of selling national assets to the public was largely untested and there was uncertainty whether the public would support the issues.

"Thankfully this was not the case. In 1984, BT was the first well known public sector company to be sold and private investors welcomed the offer. More than 2 million people participated, keen to purchase the discounted shares offered at a price of 130p.

"This performance is impressive when you consider the renowned underinvestment in assets prior to privatisation, and the higher levels of staffing at the time of flotation. However, while not actually given away, they were deeply discounted floats and when the companies were exposed to the full force of competition they certainly improved their performance, resulting in very rapid growth from a low base."

Mr Dennehy said: "At the time, Only Fools and Horses was topping the TV ratings. Del Boy's catchphrase of 'this time next year we'll be millionaires' was also a mantra from the Thatcherite generation."

But it wasn't just the privatisations that encouraged wider share ownership. At the same time the Government made it more tax-efficient to hold shares by introducing personal equity plans (or Peps) in 1986.

Initially these plans allowed people to shelter £6,000 in a tax-free environment, by investing in investment funds, or later up to £3,000 in a "single company" Pep.

But many novice investors also learnt the hard way that share dealing wasn't a one-way bet, with the stock market crash of 1987. However, share prices recovered relatively quickly compared with subsequent booms and busts of the past decade.

Property

Ray Boulger of John Charcol said that as far as the housing market was concerned the Right to Buy scheme was Margaret Thatcher’s biggest legacy. This fuelled a significant increase in the proportion of people who were able to buy their own home.

But other factors helped reform the housing market over this period. It is easy to forget that when Mrs Thatcher became Prime Minister the UK still had exchange controls after the previous Labour Government’s mismanagement of the economy resulted in the humiliation of the UK having to go to the IMF for a bail-out in 1976.

Lifting exchange controls and opening up the UK capital markets had a far reaching impact on the UK economy, and this helped transform the mortgage market during the 1980s. That decade saw several new lenders enter to UK market and new types of mortgage becoming available. Instead of mortgage queues being the norm, borrowers saw the benefit of competition with an increasing choice of different rate options, such as fixed and capped rates, which had been almost unheard of previously.

Mr Boulger said: "Lenders actually had to start competing for business rather than most borrowers having to decide which lender to start saving with in order to qualify for a standard variable rate (SVR) mortgage a couple of years later. Until the early 1980s most banks were not active in the mortgage market and nearly all mortgage lending was done by the much larger number of building societies which then existed. The Building Societies Association operated a cartel, resulting in most lenders charging the same rate. This of course would be illegal today!

Until the mid 1980s it was impossible to raise capital by remortgaging and as until then nearly all lenders charged the same rate there was no point in remortgaging to get a better, or different, rate. Therefore until that time the remortgage market didn’t exist."

Pensions

Tom McPhail, the head of pensions research at Hargreaves Lansdown, said it was "impossible to overstate" the impact that Lady Thatcher had on Britain’s retirement saving culture.

"Back in the early 1980s, we still had a relatively paternalistic pension system, with the state and employers between them providing individuals with a guaranteed retirement income, risk free," he said. "Job mobility was relatively low compared to today, meaning that the final salary pension structure made sense for both employers and employees."

He added: "Through her battles with the unions, the privatisation programme, the abolition of compulsory pension scheme membership and the introduction of personal pensions, successive Thatcher governments fundamentally changed the entire social context. We now have a system of pensions which is largely based on private provision and, while the workplace still plays an important role, individuals’ retirement prosperity is more dependent today than at any time for decades upon the personal decisions which they choose to make.

"This emphasis on individuals bearing responsibility for the decisions they take, aided and supported by their employers, is a direct legacy of Lady Thatcher."